April - June 2017

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended June 30, 2017

1. Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main and Supplementary Estimates as well as Economic Action Plan 2016 and 2017 (Budget 2016 and Budget 2017).

A summary description of Veterans Affairs Canada’s (VAC) program activities can be found in Part II of the Main Estimates.

Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes VAC’s spending authorities granted by Parliament and those used by the Department, consistent with the Main and Supplementary Estimates for the 2017–18 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

The quarterly report has not been subject to an external audit but has been reviewed by the Departmental Audit Committee.

2. Highlights of Fiscal Quarter and Fiscal Year to-Date (YTD) Results

Statement of Authorities

Overall, VAC’s authorities reflect the changing demographic profile and changing needs of the men, women, and families the Department serves. This is evidenced by an increase in the number of modern-day Veterans and survivors (forecast to increase from 102,683 as of March 31, 2017, to 107,600 as of March 31, 2018) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 76,487 as of March 31, 2017, to 67,800 as of March 31, 2018). Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on New Veterans Charter programs and benefits.

As at June 30, 2017, total authorities available (i.e. budget) for the year have increased by $1,063M (29.3%) compared to the same quarter of the previous year, from $3,628M to $4,691M. This increase is the result of a $1,003M increase in Vote 5, Grants and Contributions, a $61M increase in Vote 1, Operating Expenditures, and a $1M decrease in statutory authorities related to employee benefit costs. Over eighty percent of departmental budget increase relates to the Budget 2016 commitment to restore critical access to services for Veterans, as well as to ensure the long-term financial security of disabled Veterans. These authorities also reflect an annual adjustment based on updated client participation and program expenditures.

Total authorities used (i.e. expenditures) during the first quarter of 2017-18 are $653M (69.6%) more when compared to the same three-month period of 2016-17, from $938M to $1,591M. A break-down in the spending for the first quarter of 2017-18 indicates that Grant and Contribution spending increased by $661M, primarily due to the Budget 2016 commitment to increase the Disability Award (maximum increased to $360,000 in 2017), as well as making a top-up payment to all Veterans who received a Disability Award since April 1, 2006. This top-up payment accounts for $608M of the total $661M increase in Grant and Contribution spending. Additionally, spending on Operating expenditures decreased slightly by $8M, and spending on statutory authorities remained relatively stable with only a small decrease of approximately $250K.

Figure 1 - First Quarter and Year-to-date Expenditures Compared to Budget

Figure 1 - First Quarter and Year-to-date Expenditures Compared to Budget

Figure 1 - First Quarter and Year-to-date Expenditures Compared to Budget

Fiscal Year	Net Budgetary Authorities	Expenditures for the Quarter ended June 30th	YTD Expenditures
2016-2017	3628	938	938
2017-2018	4691	1590	1590

As a result of the Government’s expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing budgets and expenditures. This is primarily a result of the quasi-statutory nature of the Department’s programs, which are demand-driven and based on need and entitlement. In other words, Veterans who meet the eligibility criteria for VAC’s programs are paid as they apply for benefits.

Statement of Departmental Budgetary Expenditures by Standard Object

When analyzed by Standard Object, expenditures in the first quarter are generally consistent in comparison with prior-year spending. The largest variances include:

• An increase of $661M in Transfer Payments which, as noted above, relates primarily to the Budget 2016 commitment to increase the Disability Award (maximum increased to $360,000 in 2017), as well as making a top-up payment to all Veterans who received a Disability Award since April 1, 2006. Also, the department continues to see increased requirements for Earnings Loss and Supplementary Retirements and a decrease in requirements for Disability Pensions due to a decrease in the number of War Service Veterans and Survivors.
• A decrease of $20M in Personnel services resulting from the transfer of Ste. Anne’s Hospital to the Province of Quebec on April 1, 2016, and the accompanying payments that were made during the first quarter of 2016-17. This decrease is partially offset by increased staffing for case management and the disability benefit program to support recent program enhancements and demand.
• An increase of $6M in Professional and Special Services which relates primarily to costs for commemorative activities such as events for the 100th anniversary of the Battle of Vimy Ridge.
• An increase of $6M in Utilities, Materials and Supplies which relates primarily to an increase in requirements for health services for Veterans, such as prescription drugs and long-term care.

3. Risks and Uncertainties

VAC is dedicated to enhancing the health and well-being of Veterans and their families and recognizes that its success in fulfilling this mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and, ultimately, better results for Canadians. Additionally, it can lead to effective service delivery, better project management, and an increase in value for money.

VAC operates in a dynamic and complex environment characterized by internal and external drivers of change. The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.

VAC continues to manage through effective engagement across the Department. As such, the Department’s executive-level committee (Senior Management Committee) recommends overall direction for financial management and control, and the Corporate Management Committee ensures alignment of investments with departmental strategies and other initiatives. Each branch is required to have an Integrated Business Plan that has been approved by the Senior Management Committee to confirm that it has a plan in place to address the financial requirements of the branch. The Department captures program and corporate level risk in the Integrated Business Plans, including several key risks: delays in achieving the required staffing levels may delay implementation of some Departmental commitments; despite the broad range of Veterans’ programs and services available, some CAF members may not transition successfully from military to civilian life; and the department may have difficulty addressing the volume of commitments made to Veterans in a timely manner. Risk response strategies are established to lessen any impact should such risks occur.

Additionally, the Deputy Minister’s Advisory Committee (DMAC) provides an advisory function for senior departmental officials as well as performing an important oversight role in ensuring that Budget 2015 and Budget 2016 commitments are met. DMAC DMAC was established, in the context of Budget 2015 decisions to improve service delivery, to support VAC and the Department of National Defence (DND) in advancing a “Veteran-centric” approach to the protection and care of Veterans.

This integrated risk management process ultimately supports the Department in meeting its financial objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found in the 2016–17 Report on Plans and Priorities.

4. Significant Changes in Relation to Operations, Personnel and Programs

Effective June 26, 2017, Charlotte Bastien will assume the role of acting Assistant Deputy Mininster, Strategic Oversight and Communications.

Mandate Commitments:

During the third quarter of 2017–18, VAC offices were reopened in Windsor, ON; and Prince George, BC. Additionally, an office also opened in Surrey, BC. This marks the fulfillment of a commitment by the Government of Canada to reopen all nine VAC Offices and a new office in Surrey, B.C. VAC also expanded outreach to Veterans and their families in the territories and other northern communities.

Effective April 1, 2017, the Disability Award was increased from a maximum award of $314,724 to $360,000. Additionally, all Veterans who received a Disability Award since 2006 will receive an additional, tax free lump sum payment adjusted by inflation.

Also effective April 1, 2017, the new Career Impact Allowance (CIA), formerly known as Permanent Impairment Allowance, is being expanded to provide increased access to higher grade levels meaning more financial compensation for most seriously ill and injured Veterans.

Commemorative Activities:

On April 9, 2017, at the Canadian National Vimy Memorial in France, a ceremony was held to honour the sacrifices made 100 years ago during the First World War at Vimy Ridge. The ceremony was a moving artistic performance by well-known Canadian actors and musicians in the presence of dignitaries, Veterans, members of the Canadian Armed Forces, the Royal Canadian Mounted Police, 10,000 Canadian youth, Indigenous Peoples, descendants of those who served in the First World War and the public. Additionally, commemorative events were held across Canada, including at the Canadian National War Memorial in Ottawa.

5. Approvals by Senior Officials

Original signed by:

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II. Financial Statements

Statement of Authorities (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended June 30, 2016
Statement of Authorities (unaudited)
Fiscal year 2016–17

(in thousands of dollars)	Total available for use for the year ending March 31, 2017*	Used during the quarter ended June 30, 2016	Year to date used at quarter-end
Vote 1  - Net Operating expenditures	870,518	209,661	209,661
Vote 5 - Grants and Contributions	2,725,592	720,101	720,101
Statutory Authority - Minister's Salary and Motor Car Allowance	84	7	7
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	0	0
Statutory Authority – Refunds of Previous Years Revenue	0	30	30
Statutory Authority - Contributions to Employee Benefit Plans - Program	31,891	7,973	7,973
Statutory Authority – Veterans Insurance Actuarial Liability Adjustment	175	0	0
Statutory Authority – Returned Soldiers Insurance Actuarial Liability Adjustment	10	0	0
Statutory Authority – Re-establishment credits under Section 8 of the War Services Grants Act	2	0	0
Statutory Authority – Repayments under Section 15 of the War Services Grants Act	10	0	0
Total Statutory	32,172	8,010	8,010
Total Budgetary Authorities	3,628,282	937,772	937,772
Non-Budgetary Authorities	0	0	0
Total Authorities	3,628,282	937,772	937,772

* Includes only Authorities available for use and granted by Parliament at quarter-end.

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended June 30, 2017
Statement of Authorities
Fiscal year 2017–18

(in thousands of dollars)	Total available for use for the year ended March 31, 2018*	Used during the quarter ended June 30, 2017	Year to date used at quarter-end
Vote 1  - Net Operating expenditures	931,959	201,374	201,374
Vote 5 - Grants and Contributions	3,728,239	1,381,360	1,381,360
Statutory Authority - Minister's Salary and Motor Car Allowance	84	21	21
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	5	5
Statutory Authority – Refunds of Previous Years Revenue	0	1	1
Statutory Authority – Contributions to Employee Benefit Plans – Program	30,920	7,730	7,730
Statutory Authority – Veterans Insurance Actuarial Liability Adjustment	175	0	0
Statutory Authority – Returned Soldiers Insurance Actuarial Liability Adjustment	10	0	0
Statutory Authority – Re-establishment credits under Section 8 of the War Services Grants Act	2	0	0
Statutory Authority – Repayments under Section 15 of the War Services Grants Act	10	0	0
Total Statutory	31,201	7,757	7,757
Total Budgetary Authorities	4,691,399	1,590,491	1,590,491
Non-Budgetary Authorities	0	0	0
Total Authorities	4,691,399	1,590,491	1,590,491

* Includes only Authorities available for use and granted by Parliament at quarter-end.

Departmental Budgetary Expenditures by Standard Object (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended June 30, 2016
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2016–17

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2017	Expended during the quarter ended June 30, 2016	Year to date used at quarter-end
01 Personnel	241,734	77,918	77,918
02 Transportation and communications	29,073	5,742	5,742
03 Information	5,617	63	63
04 Professional and special services	411,322	81,296	81,296
05 Rentals	7,268	1,079	1,079
06 Repair and maintenance	6,608	3,513	3,513
07 Utilities, materials and supplies	191,620	43,313	43,313
08 Acquisition of land, buildings and works	1,652	0	0
09 Acquisition of machinery and equipment	2,313	87	87
10 Transfer payments	2,725,789	720,101	720,101
11 Public debt charges	0	0	0
12 Other subsidies and payments	5,286	4,660	4,660
Total gross budgetary expenditures	3,628,282	937,772	937,772
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	3,628,282	937,772	937,772

* Includes only Authorities available for use and granted by Parliament at quarter-end.

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended June 30, 2017
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2017–18

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended June 30, 2017	Year to date used at quarter-end
01 Personnel	227,949	58,678	58,678
02 Transportation and communications	29,768	6,594	6,594
03 Information	6,248	46	46
04 Professional and special services	457,547	87,105	87,105
05 Rentals	8,085	1,151	1,151
06 Repair and maintenance	11,025	536	536
07 Utilities, materials and supplies	213,154	49,726	49,726
08 Acquisition of land, buildings and works	735	0	0
09 Acquisition of machinery and equipment	2,572	195	195
10 Transfer payments	3,728,436	1,381,360	1,381,360
11 Public debt charges	0	0	0
12 Other subsidies and payments	5,880	5,100	5,100
Total gross budgetary expenditures	4,691,399	1,590,491	1,590,491
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	4,691,399	1,590,491	1,590,491

* Includes only Authorities available for use and granted by Parliament at quarter-end.